Banks baulk at hosting NREGP,cite extra costs

Banks have expressed difficulties in hosting the UPA governments flagship welfare scheme National Rural Employment Guarantee Programme (NREGP),say sources. In a recent meeting,also attended by the chief secretaries of the states,top bank officials have told Cabinet secretary KM Chandrasekhar that handling NREGP accounts and opening zero-balance accounts for beneficiaries were stretching their costs. The states also complained that the banks were reluctant to handle the NREGP cheques.

The banks said setting up branches in rural areas was difficult because of poor infrastructure and adverse law-and-order situation,especially in the Northeast and some states in central India. They also asked for support from the states to which Chandrasekhar is believed to have agreed. He asked the Planning Commission to consider asking states to construct the infrastructure required for a new bank branch,for which banks would have to make only a nominal payment. Chandrasekhar also asked the banking department of the finance ministry to prepare a paper on costs involved in setting up bank branches in a rural areas. He asked banks to simplify procedures for opening of accounts in rural areas.

According to sources,Chandrasekhar said the security-related expenditure would be borne by the states,with support from the Union home ministry.